Call for tax reform and 'new business model' for lettings sector

Tax increases on the rental sector are leaving young people unable to access the homes they need, an industry body claims.

The Residential Landlord Association’s research wing, PEARL, has surveyed almost 3,300 landlords, of which 69 per cent said that the decision to impose a three per cent stamp duty levy on the purchase of new homes to rent in 2016 is putting them off investing in further rental property.

The findings show also that just 18 per cent of the landlords responding to the survey have purchased at least one property in the last 12 months, down nine percentage points compared to the same time last year.

With recent figures from the Institute for Fiscal Studies showing that young adults are “significantly less likely to own a home at a given age than those born only five or 10 years earlier”, the RLA claims that the results show that young people now face a perfect housing storm, unable to afford a home of their own, whilst investment in new homes to rent stalls.

It adds that although government ministers have sought to boost support for corporate investment in the private rental market, just two per cent of all private rented households in the UK are Build To Rent properties.

With the vast majority of landlords being individuals, the RLA is calling for urgent measures to address the housing crisis which continues to get worse. 

It wants this to include “at the very least” scrapping the three per cent stamp duty levy where a landlord is prepared to invest in property adding to the net supply of housing. This could include new build, office conversion, bringing empty homes into use or sub-dividing existing large homes into separate dwellings.

The RLA is calling also on the government to think more creatively about the use of taxation, including providing Capital Gains Tax relief for landlords prepared to sell a property to a sitting tenant. 

This could form the basis of a new model, encouraging landlords to invest in new rental property, to sell it to their tenant after a set period and for the landlord then to repeat the process.

“Young people are now facing the full force of the housing crisis. Unable to buy a home of their own and with the supply of homes not increasing to meet rising demand, current tax policy is forcing many young adults to rely on their parents for a place to live” claims RLA policy director David Smith.

“It is time for the Treasury to think more creatively and use taxation to encourage and support landlords ready, and prepared to invest in the new homes to rent we desperately need. Without change we will still be talking of a housing crisis for years to come” he adds.

Poll: Should landlords be forced to offer their home for sale to a tenant?


  • icon

    Encouraging a private landlord to sell to a tenant after a set period sounds a bonkers act of socialist idealism. Maggie Thatcher's right to buy scheme was a broad strokes social reform policy to encourage pride in ownership of council houses. That scheme had some merit though councils may well now disagree because the 'right' included being allowed to buy at so very far below market prices that the councils cannot replace the stock. Under this new suggestion, why would a tenant feel it attractive to buy from the landlord unless they can buy at below market prices? If they do buy at a low price then the landlord will be financially unable to 'repeat the exercise'. In reality they will need the tenant to buy at well above market prices in order for the landlord to meet the costs of purchase that are over and above the price, ie legal costs, stamp duty, survey, hours taken to find a replacement property etc. the idea is weak.

  • Andrew Hill

    Tenants can already buy their homes from their landlord when the property comes onto the market and be given the same opportunity as everyone else.... What next? Forcing car rental companies to sell their cars to those who rent them just because the customer chose to rent instead of buy?


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